by Jennifer Hart Yim | May 10, 2017 | Blog, Current Events, Logistics, Strategy, Supply Chain
Starbucks’ closely managed supply chain may be the key to the premium coffee giant’s success.
The secret is the supply chain. At least that’s what Starbucks thinks.
The international coffee giant has widely studied and acclaimed supply chain management practices, which, according to some, make Starbucks’ coffee and customer experience superior to those of its competitors.
So, what exactly is Starbucks doing differently than other international coffee retailers? Is its coffee truly better?
The Standards
Starbucks uses a vertically integrated supply chain, which means that the company is involved in every step of its supply chain process, all the way from the coffee bean to the cup of coffee sold to consumers. The use of a vertically integrated system means that Starbucks works directly with its nearly 300,000 worldwide coffee growers. The company believes that interacting directly with farmers ensures that all of its coffee beans will achieve the same quality and flavor standards.
Starbucks also works directly with growers because the company is committed to only selling ethically sourced, Fair Trade coffee. The company even has its own Coffee and Farmer Equity (C.A.F.E) standards and Coffee Sourcing Guidelines (CSG), which require that all suppliers must meet certain ethical, sustainability, and quality standards. Starbucks uses a stringent vetting process to ensure its growers meet and adhere to these guidelines.
Not only do the C.A.F.E. practices and CSG benefit Starbucks, they also provide advantages for suppliers. The guidelines protect workers’ rights and ensure that all growers have safe and humane working conditions. Suppliers also must adhere to minimum-wage requirements and commit to not using child or forced labor.
Lastly, as a part of its C.A.F.E. guidelines, Starbucks commits to providing its suppliers with special training and education programs. Starbucks’ direct interaction with growers, along with their sourcing and social responsibility standards, make suppliers feel like they are integral parts of Starbucks’ corporation. The close relationship and frequent communication between Starbucks and its suppliers, therefore, make the company’s supply chain less susceptible to major disruptions, such as overplanting or worker shortages.
A quick word before we continue: We love writing about all things related to the supply chain, including Starbucks’ supply chain. Need quality content written for your supply chain business? We’re a content agency focused exclusively on working with companies like yours. Let’s chat.
The Process
After the growers pick and package the coffee beans, truckers drive the unroasted beans to ocean liners that ship the beans to six storage sites in the U.S. and Europe. The beans are roasted in these storage facilities and then packaged for shipment to Starbucks’ eight central, and forty-eight regional, distribution centers. By only using a handful of storage facilities, Starbucks can closely manage the sites’ operations and guarantee that all beans are roasted and packaged in the exact same way.
The company’s close control over the roasting process also ensures that Starbucks’ coffee tastes the same in all of its retail locations. Starbucks’ active participation in the supply chain also ensures that the distribution centers receive the products they need so they can fulfill orders and make their roughly 70,000 weekly deliveries on time.
The size and scale of Starbucks’ operations should make its supply chain inherently complex. In 2008, however, Peter Gibbons, the Executive Vice President of Global Supply Chain Operations, overhauled the company’s expensive, ever-growing supply chain into a streamlined, cost-effective process that relies on simple operational structures and metrics.
First, he grouped all supply chain jobs into four categories: plan, source, make, and deliver. Next, he developed a highly centralized logistics system that allows the company to better manage and coordinate its global network. Lastly, he implemented a binary, 0 or 1 “scorecard system” to assess all supply chain activities on four metrics: safety in operations; service measured by on-time delivery and order-fill rates; total supply chain costs; and enterprise savings.
Along with the simple tools and processes that Gibbons created, Starbucks also relies heavily on digital technology to manage its supply chain. The company uses an automated information system that allows it to monitor demand, inventory, capacity, and scheduling in real time. Therefore, Starbucks can quickly adjust its plans and operations as needed. Starbucks’ simple structure and management tools, as well as its use of digital technology, allow the company to achieve a high level of efficiency and agility, both of which are key to organizational success.
The Market
Starbucks’ biggest competitor in the international coffee market is Dunkin’ Donuts. In contrast to Starbucks, which owns its entire supply chain, Dunkin’ Donuts outsources its production processes. Dunkin’ Donuts relies on a third-party intermediary, National DCP, to handle the company’s supply chain operations.
Dunkin’ Donuts also franchises its manufacturing locations, as well as nearly all of its retail spaces. Conversely, Starbucks franchises less than 50% of its retail locations, and, as of March 2016, was no longer accepting applications for new U.S. franchises. Starbucks also uses few to no intermediaries to carry out its supply chain operations.
Unlike Starbucks — which is committed to using 100% sustainably grown, Fair Trade-certified coffee beans — Dunkin’ Donuts promises to produce its coffee as “sustainably as possible.” The company works with Fair Trade USA and the Rainforest Alliance to implement sustainable sourcing practices, as well as training programs for farmers. However, Dunkin’ Donuts only offers two permanent menu items that are Fair Trade-certified: 30% Rainforest Alliance Certified™ Dark Roast Blend and 100% Fair Trade Certified™ espresso.
While Starbucks’ critics may try to argue that the company’s supply chain model and social responsibility efforts are not true differentiators, the statistics tell a different story.
Starbucks was founded roughly twenty years after Dunkin’ Donuts, but the company is already much larger than its rival. In 2023, Starbucks generated $32.2 billion dollars in revenue, while Dunkin’ earned only $1.4 billion. Starbucks also has a larger global presence, with nearly 37,000 retail stores in 80 markets worldwide, compared to Dunkin’s 13,500 locations in 40 countries.
Starbucks also primarily markets to higher-income customers looking for a premium coffee experience, while Dunkin’ Donuts has traditionally retailed to more blue-collar consumers who want coffee on the go. Therefore, Starbucks’ clientele is willing to pay more for coffee that they perceive to be made from higher-quality, socially responsible sources. It used to be that Starbucks’ customers would also pay more for coffee in order to enjoy the amenities offered in the company’s coffeehouses, but even with a consumer shift towards drive-thru and mobile pick-up preferences, Starbucks’ customers seem willing to pay more for convenience. Because Starbucks’ patrons generally have higher disposable incomes than those of Dunkin’ Donuts’ customers, they are less likely to adjust their consumption patterns during economic downturns. Thus, Starbucks is less susceptible than Dunkin’ Donuts to major fluctuations in revenues that could result from negative macroeconomic swings.
The Future
While Dunkin’ Donuts loyalists, particularly those in New England, may never accept the merits of Starbucks coffee, majority opinion argues that Starbucks offers higher-quality beverages and better customer experiences. Statistics show that Starbucks is outperforming its rival, which is evidence of the success of a simple and efficient global supply chain. In fact, Starbucks, which is already larger than Dunkin’ Donuts both domestically and abroad, plans to open more new retail spaces than its competitor over the next five years.
Therefore, one question remains for coffee drinkers and market analysts: Does America actually run on Dunkin’? Or is Starbucks’ coffee really the fuel running our caffeine-crazed country (and world)?
We love writing about all things related to the supply chain, including Starbucks’ supply chain. Need quality content written for your supply chain business? We’re a content agency focused exclusively on working with companies like yours. Let’s chat.
This article is part of a series of articles written by MBA students and graduates from the University of New Hampshire Peter T. Paul College of Business and Economics.
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by Jennifer Hart Yim | Apr 18, 2017 | Blog, Current Events, Logistics, Strategy, Supply Chain
Blockchain is coming, and it offers the potential to shake up Supply Chain and Logistics like few other technologies coming down the pike.
This guest post comes to us from Argentus Supply Chain Recruiting, a boutique recruitment firm specializing in Supply Chain Management and Procurement.
A few months back, we wrote about Blockchain as an emerging technology and tool for Supply Chain transparency. It’s a pretty incredible technology that stands to reshape big aspects of the economy in general and Supply Chain in particular – but it’s also pretty difficult for the common person to understand, which doesn’t help matters. But Blockchain is coming, and it offers the potential to shake up Supply Chain and Logistics like few other technologies coming down the pike.
In the simplest terms possible, Blockchain is a distributed ledger technology that allows a decentralized network to track transactions within a system. It’s the technological basis for Bitcoin that solved the problem of how to verify transactions for a digital currency without relying on a central entity or bank.
One of the most relevant parts of Blockchain for Supply Chain purposes is the fact that Blockchains tend to be more open and transparent than other sorts of ledger systems – anyone participating in the network can see the transactions. Which has led Financial Services companies to seek out Blockchain technology to more quickly make cross-border payments and verify contracts. It’s also led to companies using Blockchain’s openness to redefine transparency about where they source their products. For example, seafood companies and other food production companies with overseas sourcing can use Blockchain to keep a solid record of every transaction along the Supply Chain, so that consumers can rest assured that the fish they’re buying was farmed sustainably, without using human slavery.
Here’s another new application: shipping giant Maersk is partnering with IBM to use Blockchain to track shipping containers. The goal here isn’t as much transparency as efficiency – which is a much-beloved quality in contemporary Supply Chains. Tracking shipping containers can involve dozens of people and hundreds of individual interactions as it makes its course along the Supply Chain from, say, China to the West Coast of the U.S. Maersks’s new Blockchain program will allow all stakeholders to witness the shipment’s progress and status at all times. The idea is to cut down on paperwork involved and allow both suppliers, buyers and shippers to streamline the process.
At the same time, Wal-Mart is delving into using Blockchain for food safety. Whereas merchants traditionally struggle with unfortunate product recalls that happen from time to time – pinpointing a specific SKU, a specific shipment, a specific vendor, of a product that’s made a customer ill and then taking it off the shelf – Wal-Mart is hoping that Blockchain will help it glean important data from receipts all up and down the Supply Chain: where was the food grown, who inspected it, etc.?
This can help the company be more strategic in removing items from shelves, avoiding the kind of broad-brush recalls (“pull all the spinach!”) that can cost a company millions.
With Wal-mart, Maersk, IBM, and other companies like Nasdaq and BHP Billiton starting to make their way into using Blockchain, it’s clear that the burgeoning tech has finally arrived on the scene.
Any Blockchain experts out there? Are there other applications or implications for Procurement and Supply Chain that we might not be thinking of? Let us know in the comments!
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by Jennifer Hart Yim | Apr 13, 2017 | Blog, Logistics, Strategy, Supply Chain, Transportation & Trucking
This guest post comes to us from Adam Robinson, director of marketing for Cerasis, a top freight logistics company and truckload freight broker.
Growing woes over a forthcoming capacity crunch are not going away anytime soon. But, the capacity crunch may have a major impact on the freight driver shortage and vice versa. In a sense, fewer drivers mean that capacity will grow tighter. Yet, as capacity shrinks, the incentive for drivers increases. As 2017 moves forward, it may be a year that the driver shortage comes to a head, but it might not be as dismal as some shippers have been led to believe.
The Freight Driver Shortage IS BAD and Getting Worse.
The American Truckers Association cites approximately 48,000 unfilled trucker positions, reports Saul Gonzalez. Since 2005, the freight driver shortage has grown from 20,000 unfilled positions to 70,000, and some reports suggest the shortage may worsen to more than 170,000 vacancies by 2025. Meanwhile, the average of age of today’s trucker is 49, and more truckers are aging out and retiring from the industry. This contributes to a growing bleakness among the trucking industry, causing turmoil among shippers and logistics providers. But, there is a light at the end of the proverbial tunnel.
Could Automation Reduce the Impact of the Driver Shortage in 2017?
Politicians and industry experts have claimed for more than a year that automation and drone delivery will be able to handle the driver shortage, and while this belief may hold true, the widespread deployment of driverless trucks is still far from reality. As explained by Sean Kilcarr of FleetOwner®, the political discussion seems to continue pointing toward more affordable and available education of futuristic technologies.
This might be true in the future, but current political turmoil suggests that any such move will be met with extensive resistance from the opposing political party. In other words, education and re-skilling of workers to service autonomous vehicles and automated technology is not ready for widespread deployment. However, the answer to the growing driver shortage might lie in the capacity crunch itself.
How Could the Capacity Crunch Help the Driver Shortage?
It sounds insane; tightening of the capacity crunch could help solve the driver shortage. Look at the historic tightening of capacity in the shipping industry. In 2004, 2011 and 2014, capacity reached a critical point. Yet, major carriers, reports Jeff Della Rosa of Talkbusiness.net, met the increased demand by increasing trucker wages by 7-percent per loaded mile. Consequently, the overall annual wage of drivers increased during these three years, providing temporary relief for a looming driver shortage.
2017 appears to be another year in the lineup of driver wage increases too. Companies, including Crete Carrier, Baylor Trucking and Shaffer Trucking and CFI have implemented per-mile rate increases. Meanwhile, Swift Transportation, Schneider, and CGI have unveiled $4,000 – $8,000 bonuses for new drivers. So, the wages are starting to reflect the demand for drivers. In fact, Delco expects industry-wide wage increases among trucking companies throughout the remainder of 2017.
Will the Driver Shortage Succumb to Capacity Crunch After All?
It’s easy to gain a false sense of security as wages climb among the trucking industry, and for shippers, this means that they may be considering abandoning previous preparations for worsening of the shortage. However, shippers need to continue working to help the freight driver shortage. Yet, shippers want to pay the least cost possible for transportation of goods, which results in lower profits for carriers and wages for drivers. So, how do shippers help prevent the driver shortage from worsening?
The answer is working with multiple carriers to find the best rates without undercutting the industry. In other words, more shippers will turn to third-party logistics providers (3PLs) who offer more than just shipping management, to increase profit margins across their enterprise, allowing for more expendability among the actual freight costs of shipping. In other words, savings found from auditing and eliminating redundancies in paperwork frees funds for use among actual freight costs. To shippers, the overall costs decrease, but to truckers, it means more money available for use as wages, benefits, and better equipment.
In a Nutshell.
As capacity tightens in the industry, shippers will face the challenge of reaching more customers with fewer resources, and the freight driver shortage may spike temporarily. However, the capacity crunch itself will help curb the driver shortage, and reaction to capacity issues will further the cause of better wages and incentive for more drivers to enter the industry. Of course, nationwide low unemployment and better wages among other industries will still draw people away from the trucking industry, reports the Journal of Commerce (JOC). Remember the saying, “it’s always darkest before dawn.” The driver shortage may not come to a head just yet, provided the industry continues to increase wages and work to increase driver retention.
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by Jennifer Hart Yim | Mar 22, 2017 | Blog, Leadership, Logistics, Supply Chain, Talent
By calling them “soft skills,” are we shortchanging competencies that are critical for supply chain and procurement professionals to succeed?
This guest post comes to us from Argentus Supply Chain Recruiting, a boutique recruitment firm specializing in Supply Chain Management and Procurement.
One of the biggest stories in the world of Supply Chain and Procurement talent over the past few years has been the emerging importance of Soft Skills. Time was, the business world saw Supply Chain and Procurement as highly analytical fields, where the ability to organize and interpret data was paramount. Analytical skills are still important, of course. But as the field has become more strategic — with a greater impact on wider areas of business — professionals in the field have had to become stronger at advocating for it. No senior Procurement professional is going to get very far into a Procurement transformation without being able to advocate for their Procurement method and what it can deliver. No one is going to transform their organization’s Supply Chain without being able to explain whatever insights they’ve gleaned from data to senior management.
When we say “Soft Skills,” we generally mean:
- Verbal communications
- Written communications
- Relationship-building skills
- Presentation ability
- The ever-elusive and hard-to-define-but-you-know-it-when-you-see-it “polish”
There’s no doubt they’re important, especially when it comes to moving into the senior ranks of leadership. But by calling them “soft skills,” are we really shortchanging them and treating them as ancillary to the “main,” “vocational” skills we ask for? Maybe it’s time to put them front and center.
They may be skills, but they’re not soft
Marketing guru and entrepreneur Seth Godin had an interesting post about the concept of “Soft Skills” and whether the way we think about them needs a revamp: “Let’s stop calling them ‘soft skills.’ They might be skills, but they’re not soft,” he says.
Godin’s basic point is that soft skills build a great workplace culture. And workplace culture isn’t an ancillary bonus to a business’s core function. It is a business’s core function. Godin doesn’t discount the importance of vocational skills. You can’t make a Supply Chain run without data. But for all the talk about strategy, a truly successful company succeeds not because of its strategy, but its culture — just like a truly successful career in business is often driven by soft skills rather than vocational skills.
His point is also that we don’t put as much effort into training soft skills as we do vocational skills, which might be because vocational skills are easier to measure. For example your typing speed (or for a Supply Chain role, your facility with SAP or JAD software) is much easier to measure than the kind of empathic awareness that makes a team sing. The result?
“Organizations hire and fire based on vocational skill output all the time, but practically need an act of the board to get rid of a negative thinker, a bully or a sloth (if he/she is good at something measurable).”
Rebranding soft skills as real skills
Godin’s suggestion is to rename soft skills “real skills” and break them down into new categories by which we might assess them:
- Self Control
- Productivity
- Wisdom
- Perception
- Influence
He breaks these categories down into an exhaustive list of skills (“diplomacy in difficult situations,” “etiquette”) that’s definitely worth checking out, and worth assessing in new hires. It gets a little abstract, but we couldn’t agree more with Godin’s core point: It’s time to put “soft skills” front and center.
In Supply Chain and Procurement, which are the areas we recruit for, soft skills are taking on more relevance as automation begins to handle the nuts and bolts of how products come to market, and how companies work with suppliers. The function is becoming more nimble and more strategic, and the future belongs to those who are able to be strategic advocates — and the companies that prize this in their hires.
Yet in a field that is, by its very nature, obsessed with efficiency, measurement, and data, soft skills sometimes take a back seat.
We think it’s time to change that.
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by Jennifer Hart Yim | Mar 16, 2017 | Blog, Logistics, Strategy, Supply Chain, Transportation & Trucking
Try these affordable online tools and mobile applications to help the logistics professional control their business.
This guest post comes to us from Adam Robinson, marketing manager at Cerasis, a top freight logistics company and truckload freight broker.
Logistics professionals require exemplary international online logistics tools to help them carry out their daily businesses with ease and deliver the best for their customers. For any developing business, adopting the widely used and affordable technologies is more economical. Mobile phones can offer incredible services in any business from inventory tracking and shipments to the execution of procurement transactions. Let’s base our discussion on online trucking logistics and mobile applications that can be used in supply chain management on a global basis by the logistic professional to control their business.
Top 8 Online Logistics Tools For Logistics Professionals
1. The Scandit mobile application software
Scandit is one of the top mobile online logistics tools used in international logistics in supply chain management. It is an advanced barcode scanner that is capable of extending bar code scanning to technology savvy inventory manager. Unlike other scanners, the scan in Scandal doesn’t have to be perfect to process data as it can scan hard to reach the barcodes with ease. It is also cross-platform enabled to facilitate ease of data sharing across other networks online.
2. The Easy stock mobile application software
This optimization tool for inventories is cloud based. It systematically limits access from the warehouse locations to minimize cost while maximizing on the availability of highly profitable items. It is one of the essential online logistics tools that can help managers forecast, plan the inventories, and a budget for the available resources. Most logistics prefer integrating the use of this app to automate procurement and replenish other processes to raise the profit margins.
3. The Web fleet Android application
The web fleet Android application is an incredible mobile application suitable for retaining control of the daily operations of your workforce. This app can be accessed through web browsing, where the logistic professionals can manage their business in real time just from their phones or laptops at the comfort of their seats. This application will help you track the daily operations 24 hours to ensure the credibility of your workforce and efficiency in your operations.
4. Service Max mobile app
Service Max mobile app is one of the best and top-selling apps in service management field that every logistic professional should consider using. The app combines the integration of service contracts, management of orders, workforce optimization and monitoring of social media customers. It builds an end-to-end service organization view of your relations with the clients who help you analyze the quality of your services and the reactions of the customers towards them. The feedback shared through social media, such as Twitter, by the people using your services helps you to gauge yourself and point out the areas that require improvement.
5. The Co-pilot Android mobile app
Co-pilot Android mobile app is an incredible online logistics tool employed in international logistics. It offers mapping and direction routing. It facilitates navigation through online tracking of your vehicle for efficiency. The application has additional algorithms that help the truck drivers follow efficient routes to avoid traffic and other obstacles that can delay the delivery. It is with a 100% surely that every logistic will be interested in the quick delivery of his/her business services within the shortest time possible which can be catered for using this application. The app also gives the dynamic information of the various navigation routes such as truck height and weight to ensure smooth navigation in the designated routes.
6. The Logistics mobile app
Logistics is a multipurpose free on-line Android mobile application used for on-line tracking logistics. It can be used to track drivers, shipment of goods, vehicles and client’s operations. Every logistic professional should look for this app to increase the visibility of the entire supply chain with the use of a smartphone. This incredible app will help you monitor and track your logistic operations with ease and confidence.
7. The Evernote online mobile application
Evernote, as well as Eduzaurus, has been rated as the best tool used by professional logistics in organizing important files, documents and images and is, therefore, a widespread global application in the field of supply chain management. It is widely known and used in online filing and storage of documents used in the supply chain. It has an added advantage as compared to other supply chain mobile applications due to its ability to record voice memos when you are away through an inbuilt voice recording technology. This helps the manager to track the success of the workforce when away. With this mobile application, it is a guarantee of success to the managers and logistics in file organization field.
8. The Cerasis Rater — A Web-Based Transportation Management System with Companion Mobile App
The Cerasis Rater allows you to process shipments for the following over-the-road modes:
- Less than truckload
- Small Package, also known as Parcel
- Intermodal
- Full Truckload moves
The Cerasis Rater eliminates the manual process of booking shipments. Before using online logistics tools, you’ve most likely wasted time, energy, and money trying to maintain your carrier rates, calling carriers to try and get the best price, and lost efficiency from having to keep up with paper bills of lading. The Cerasis Rater offers many automation & efficiency benefits to include:
- Process your own shipment, at any time, 24/7 through our web-based portal.
- Upload, store, and maintain your shipper address book with pre-population to maintain accuracy and save time.
- Store your custom commodities, and over time the Cerasis Rater puts the most commonly used to the top of the list for faster processing.
- Choose from multiple carriers whose rates are negotiated specifically to your needs within the system, allowing you to not waste time or energy, and to not leave money on the table at the time of shipment.
- Choose carriers based on rate, transit time, and limit of liability to ensure your cargo and your peace of mind are covered.
- Print batch freight quotes, bills of lading, invoices, and labels all within the same system.
- Create, email, and print bills of lading when you are done processing your freight shipment.
- E-mail notification options customized to your needs.
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